Sirius september thread

[Sirius Roadkill]

Déjà vu All Over Again
Yet, if history is any indication - like Infinity before them, and WNBC before that - Sirius XM is in for a rude awakening about its future prospects without Stern. The fact is, nothing else at the service generates any kind of publicity to remind people satellite radio still exists. His departure would therefore completely erase references to satellite from everything except the business pages of the media.

As well, with the use of mobile communication exploding worldwide, consumers are tapping into innovative services like Pandora to recreate, at home and on their Smartphones, the satellite radio experience - its diversity of music, sports programming, and talk shows - for free. As memberships expire and automakers begin incorporating cellular technology into their cars, Sirius XM may find Detroit - and its listeners - abandoning its platform at a harrowing pace.

And finally, Stern's move online will be a major industry event, and many people will be watching closely. If he should succeed at creating the same sense of excitement for alternative media that he did for satellite, it could prove the tipping point that finally legitimizes the paid digital business model. The results would be a rapid migration of new talent to the online world and massive investments in original content that could attract more people and sink satellite radio even faster.

But should Stern remain at Sirius XM, can he still help them retain and even grow their subscriber base? Maybe not. Sirius XM has never really promoted its relation to Stern correctly. After the first, heady year of his arrival, the company began to systematically distance itself from him, to the point where they almost seemed like two separate entities: There was the Howard Stern Show, and there was the rest of satellite radio. Perhaps management was eager to prevent subscribers from equating a subscription to satellite radio with support for Stern, who remained a lightning rod for controversy. Or perhaps they became nervous at the thought that the success of their multi-billion dollar empire rested on the shoulders of one man.

In any event, their strategy worked all too well, and the Stern halo no longer encompasses the rest of the service. Today, there may simply not be enough time for management to change course and attract enough of the kinds of devoted fans that will listen to Stern and stick with the service - in whatever form it takes and wherever it goes.

Draggin' the Line
If Stern had his choice, he would rather stay with satellite. He has a distaste for the unknown - and that's exactly where his foray into the digital world will take him. But the harsh reality is that satellite radio, at this point, has become an albatross around his neck, and he needs to move on. Isolated by management, Stern is locked in his gilded cage, conscientiously entertaining his still-sizeable core of loyal listeners, but otherwise barely reaching the audience he once commanded beyond satellite's limited borders.

Ironically, in isolating Stern, Sirius XM is accomplishing something that neither the FCC nor fanatical fringe religious and conservative groups could ever accomplish - silencing Howard Stern. If Stern is to rescue his extraordinary legacy from the bottomless pit of anonymity into which satellite radio is burying him, it is imperative that he remove himself from under its yoke - and re-establish his unique identity, and retake control of his audience, through the medium that can let him do so.

[SiriuslyLong]

Phuck Stern the whiney self obsessed jackass. He'll sign. There is something of value to an established enterprise that let's him do his thing. Moving is too much work. Anyway..............

SIRI up 3 cents in premarket. Barrington raised their price target from $1.25 to $1.50.

http://www.thestreet.com/story/10870...me-movers.html

Maybe Mr. Dead Money will get in now? Go ahead, make the bet that Stern will re-sign..

Happy Friday everyone. Julie needs to fill you in on how nice the weather is here in Michigan.

[Sirius Roadkill]

Barrington raised their price target from $1.25 to $1.50.

Meanwhile, over at RBC Capital Markets, David Bank's bloated SAC is really starting to become a freak show as his peers drift further and further away from his 1 Year $1.00 price target.

[Sirius Roadkill]

Is Sirius XM Going to $1.50?
By Rick Aristotle Munarriz
September 24, 2010

I'm not the only one feeling chipper about Sirius XM Radio's (Nasdaq: SIRI) prospects these days.

Barrington Research analyst James Goss is reiterating his "outperform" rating on shares of the satellite radio giant, but raising his near-term price target from $1.25 to $1.50.

It may be just a quarter, but it's a chunky 20% lift. Sirius XM has clearly come a long way since it teetered on the brink of bankruptcy last year, with its stock trading as low as $0.05 a share.

Goss' optimism is essentially what we've been seeing for months. Retail subscriber erosion is being more than offset by automakers selling cars with factory-installed Sirius or XM receivers. Sirius XM has 1.1 million more subscribers -- now at 19.5 million -- than it had at this point a year ago.

Churn is decreasing. Conversion rates are high. Initiatives for used car lots to push subscriptions on cars with inactive receivers are a potential goldmine.

Can Sirius XM really be worth $1.50? The higher that Sirius XM's stock goes, the more it relies on valuation than speculative momentum to justify its price swings. Let's peek under the hood.

Goss feels that Sirius XM can be generating $1 billion in EBITDA by 2013. What does this mean for Sirius XM investors? Well, let's work the math. Now that Sirius XM is profitable, Liberty Capital's (Nasdaq: LCAPA) 40% preferred share stake in the company is working its way into the income statement. This is why diluted shares outstanding popped to 6.4 billion in Sirius XM's latest quarter.

The satellite radio star has a liberal history when it comes to printing new shares, but that pace should slow considerably now that Sirius XM is somewhat self-sustaining. Let's allow for stock options and other issuances and go with a round 7 billion diluted shares outstanding come 2013. There is also roughly $3 billion in long-term debt. In other words, at $1.50 we're looking at a market cap of $10.5 billion on 7 billion shares and $13.5 billion in enterprise value (if the debt level remains constant). Trading at an enterprise value to EBITDA multiple of 13-14 -- three years out -- isn't cheap, but it's not outrageous for what is now the only game in town when it comes to premium radio.

Satellite television giants DIRECTV (NYSE: DTV) and DISH (Nasdaq: DISH) fetch far lower multiples, but they toil away in a cutthroat -- and some would argue, fading -- market. Satellite radio remains a realm of growth.

In reality, it shouldn't surprise anyone if Sirius XM is trading for quite a bit more than $1.50 come 2013. It would mean a stiffer multiple, but Goss is setting the $1.50 price as a near-term mark. Few investors would be up to sticking around with a volatile stock for the sake of 30% in capital appreciation over five years.

However, for Sirius XM to truly claw its way out of pocket-change pricing -- without a reverse split -- it will also have to evolve. Whether it means reaching out to more listeners (and this could be domestically or abroad where its satellites don't reach, but streaming initiatives will) or simply milking more out of its subscribers (either through higher monthly rates, beefed up advertising, or new revenue streams), it has to happen to keep the party going.

Either way, a lot of analysts are warming up to satellite radio with valuation models to justify their enthusiasm.

You've come a long way, Sirius XM.

[Sirius Roadkill]

BOSTON (TheStreet) -- Sirius XM (SIRI_) was one of several stocks poised to move on above-average volume Friday after an analyst raised his price target on the satellite radio company.

Sirius XM may see increased volume after Barrington Research analyst James Goss reiterated his outperform rating on the stock and raised his price target to $1.50 from $1.25. Goss says the increased price target is due to the migration to a 2011-based target value, and is based on additional subscriber growth optimism.

"Sirius XM is on track to generate increasing subscriber counts, higher revenues and improving profitability," Goss writes. "We feel an increasing number of investors are willing to give this story more serious consideration as management demonstrates success in dealing with the speculative elements and creates a clearer path to meaningful positive results."

Shares of Sirius XM closed Thursday at $1.16 and were up nearly 1% in the after-market session. The average daily share volume for Sirius XM is 83.5 million.


When asked about this latest upgrade, a seemingly baffled and somewhat irritated Tyler Savery responded:

"I am not at all baffled. I have stated multiple times that I think SIRI is fairly valued at $1.10. What part of that do you not comprehend?"

[Boomer]

I had some problems with the assumptions used in that MF article, but what i found more interesting then anything was a comment by a poster named waterinfo that wrote more of an "article" then a comment and I liked his very optimistic outlook. Hope he doesn't mind me posting it here:

On September 24, 2010, at 1:21 PM, waterinfo wrote:
SERIOUS SIRIUS NUMBERS

Before 1930, zero percent of all automobiles had radios. In 1930 Paul Galvin, owner of Galvin Manufacturing, Inc., which built certain electrical components for automobiles, developed the first AM auto radio, consisting of a box about the size of a carry-on suitcase, a control console mounted on the dashboard, and a speaker, large enough to put the woofer in your $10,000 audio system to shame. He installed this equipment in his personal auto and demonstrated it at a trade show in Atlantic City. The attendees were impressed, and over the next few years, Galvin’s technicians toured the country installing “Motorola’s” in private autos. Within a few years, auto radios were an option from every auto manufacturer, and when auto production resumed after World War II, nearly every car built had an AM radio installed.

In the 1960’s the first FM radios, or more correctly AM/FM radios were added to auto option lists. Initial acceptance was slow, but by 1980 essentially every auto radio was AM/FM.

In the 1970’s auto sound systems had no music reproduction (e.g. tape) player. 8 Track cartridge players, and soon thereafter 4 Track Cassette players were introduced and by the mid 1980’s nearly every auto sound system had a “tape” player.

In the 1990’s CD players were introduced, and again, after relatively slow acceptance, eventually, by 2000 reached the point that they were standard equipment with nearly every auto sound system.

In the early part of the new millennium, Sirius Radio and XM Radio introduced the concept of satellite broadcast, targeted to the auto sound system. Despite the epic battle between these two, very well capitalized new ventures, acceptance was slow, and turf battles between the two providers left potential customers confused, and reluctant to commit to one system or the other. Fortunately, by 2008, both companies, and the U.S. Government (both the Federal Communications Commission and the Justice Department) agreed that the only way for satellite radio as a broad based consumer service to survive was to permit the two companies to merge.

Acceptance of the “paid” satellite radio subscription, having been previously targeted primarily to “premium” priced automobiles, began to find acceptance across the full spectrum of auto manufacturers. The combination of the two companies removed purchase decision obstacles from most consumers, as the channel list merged, and a “complete” service was available with the satellite radio from any auto manufacturer.

Now, in late 2010, SiriusXM subscribers number close to 20,000,000, and nearly every auto sold in the US has SiriusXM radio either as standard feature, or alternatively as a very low cost option, except maybe Porsche, who still has the nerve to charge $750 for the SiriusXM option. Of course, I’ve yet to see a 2010 or 2011 Porsche on any dealer’s lot that does not have that option installed already.

In most cases, the delivery of a new auto with SiriusXM installed includes an initial trial subscription, and one of SiriusXM’s greatest challenges is to get essentially all of those trials to turn into revenue paying customers. However, even with a new car sales rate as low as 12 Million units per year, and even with a conversion rate 80% of trial subscribers, SiriusXM should have a subscriber count close to 100 Million by 2020.

What about revenue? Right now SiriusXM is seeing gross revenue of only about $120/year per subscriber. Since subscription fees are much more than $10/month, where is the rest of the revenue? It is “free trial” subscribers, and in the subscribers that have been offered very aggressive incentives to keep their radios active. Over time, these incentives will not be needed as user’s perception of Satellite radio becomes more like consumer perception of Cable/Satellite TV. If someone tells you that they have no cable or satellite system at home, you probably think that they are lying!

By 2020, it is more likely that gross revenue per subscriber will exceed $200 per year (current dollars) and not even close to the current value of $120. So by 2020, total revenue of $20 Billion would not be unrealistic. And this does not even include revenue from equipment sales (e.g. home receivers), from special “pay per hear” broadcasts, from auxiliary services (such as weather, routing, traffic, etc), or most of all, from additional advertising revenue from non-commercial free channels, which, if SiriusXM is smart, will be made available to anyone who has the receiver but chooses not to subscribe to the paid service.

What kind of profit could be generated from a $20 Billion revenue stream? Cost of revenue (which I guess is heavily royalty and talent based) certainly shouldn’t increase by more than 25 or 30 cents for each new revenue dollar. Let’s assume 30 cents. Thus, revenue increase of $17 Billion (from today’s revenue levels) should increase the cost of revenue by about $5 Billion. R&D might increase from about $120 Million today to $400 Million. SG&A, currently running at about 20% of revenue should drop to no more than 12% of revenue, or about $2.4 Billion. All other expenses, currently running about 10% of revenue should drop to no more than 5% of revenue, or about $1 Billion. So let’s look at the top level income statement, circa 2020 for SiriusXM:

Dollar amounts in Millions:

Revenue $20,000

Cost of Revenue $ 6,400

Gross Profit $13,600

R&D $ 400

SG&A $2,400

All Other $1,000

EBITA $9,800.

By 2020, Sirius XM should be generating nearly $10 Billion in cash flow before interest and taxes. Now for the really beautiful part of the SiriusXM business. Unlike cable TV, unlike internet services, unlike wireless phone services, unlike terrestrial wireless entertainment services, new subscribers to SiriusXM services use no additional resources from the Sirius system. The same radio signals that serve 1000 subscribers will serve 1,000,000 subscribers. And the same radio signals that serve today’s 20 Million subscribers, will in principle, serve 2020’s 100 Million subscribers. In essence, given the large capital investment in today’s SiriusXM systems, the future capital cost per subscriber is very low. Most future capital costs will be used to add additional services, facilities, and programs, each designed to generate additional revenue. It is beyond the scope of this brief analysis to estimate SiriusXM future capital needs. But suffice it to say, that a company with an EBITA of nearly $10 Billion per year should have no trouble financing additional future capital needs. Even if today’s interest expense of about $300 M per year were to increase to $1 Billion per year, the SiriusXM operating profit by 2010 should be on the order of $9 Billion, or about $2.30 per currently existing SiriusXM share.

To get from today’s nearly break even operating income, to an operating income of $2.30 per share, in a relatively smooth trajectory over the next 10 years, would represent a profit growth rate of more than 30% per year. What might the stock market pay for a company growing profits at more than 30% a year, with a huge, relatively captive customer base? Twelve time earnings, twenty, maybe forty? Even at twenty times earnings, SiriusXM shares in 2020 should be selling for at least $46 per share. Spread evenly (which of course it never would happen that way) means that the shares should increase an average of $5 per share per year between 2010 and 2020. More likely, once the investing public realizes what a gem SiriusXM really is, the multiple will probably jump to 50 or 100 times soon, and taper off toward a multiple of 15 or 20 times by 2020.

Like Galvin’s first “Motorola”, SiriusXM was, in most ways was ahead of its time. But, it’s time has come. Now, if customer services could only be made as good the programming.

Report this Comment On September 24, 2010, at 1:32 PM, Fredlee009 wrote:
Wow, Nice post. Hard to follow that. Not a post, its a classic article sir.

I was simply going to say reading anything now from this author (in my opinion hes terrible) just makes me sick, bullish, bearish doesnt matter anymore. All bs to me. Just hush, and enjoy the show Rick. Sirius XM is going up whether you like it or not, based on what they have already accomplished as well. Nice try.

Report this Comment On September 24, 2010, at 1:52 PM, Austin77478 wrote:
Rick, what shall it profit a man, if he continues to bash Sirius?

Report this Comment On September 24, 2010, at 4:41 PM, WoodyDog1400 wrote:
No, it is not going to $1.50

It is going to $2.00. see you there.

Report this Comment On September 24, 2010, at 5:20 PM, multi007 wrote:
I bought at .54 cents a share. When should I sell? Everyone talks about when you should buy, but I dont see people saying things like "If it hits $3, or $4 or $8 you should sell?"

Report this Comment On September 24, 2010, at 5:22 PM, multi007 wrote:
FYI - not that many people know about this, but SIRI offers lifetime subscriptions. At around $550 per car (that can be transfered to your new car up to 3 times for free) it would take about 3.5 years to break even. This will undoubtedly result in a loss of revenue. I wonder though if this would hit SIRI bottom line hard

[Sirius Roadkill]

"Even if today’s interest expense of about $300 M per year were to increase to $1 Billion per year, the SiriusXM operating profit by 2010 should be on the order of $9 Billion, or about $2.30 per currently existing SiriusXM share."

Nice read but . . . even ignoring all of the expense-side assumptions . . . . 100% penetration, 80% conversion and zero churn:

$9B/3.9B = $2.31/Share without Liberty Preferred's;

$9B/(3.9B/.60) = $1.38/Share with Liberty Preferred's;

20 X $1.38 = $27.60 SP

btw, 8-Track was available in 1970's

[Sirius Roadkill]

September 24, 2010, 9:25 AM ET.Sirius XM: Barrington Ups Tgt To $1.50; Upbeat On Sub Growth

By Eric Savitz

Barrington Research analyst James Goss this morning repeated his Outperform rating on Sirius XM (SIRI), lifting his target on the stock to $1.50, from $1.25.

“Sirius XM continues to develop an improving fundamental story,” he writes in a research report. “As we have noted in recent quarters, the key driver of subscriber growth is the OEM side of the business, making up for continuing erosion on the retail side. Subscriber dynamics are substantially different between these categories. Even with a very impressive conversion rate of 46.7% of paid promotional OEM subscribers deciding to become self-paying subscribers, an even more sizable 53.7% of paid promotional subscribers come off the subscriber rolls each quarter. In addition, a monthly churn rate of just under 2% implies that Sirius XM needs to continually replace nearly one quarter of its subscriber base each year just to stay even - a daunting task.”

But he thinks the company is up to the challenge.

“Can Sirius XM continue to generate subscriber growth in the face of this increasingly difficult challenge?” he asks. “We feel it can…Further, as we do not allow for the nascent certified pre-owned automobile market, our assumptions are likely on the conservative side.”

Goss also notes that he thinks the company can boost EBITDA to more than $1 billion by 2013, suggesting compounded annual growth over the 2009-2013 period of 24%.

SIRI this morning is up 3 cents, or 2.6%, to $1.19.


"In addition, a monthly churn rate of just under 2% implies that Sirius XM needs to continually replace nearly one quarter of its subscriber base each year just to stay even"

Slight exaggeration by Goss . . . 1.8% Monthly Churn (not 2%) X 12 = 21.60% . . . which is just slightly over one-fifth . . but hey, who's counting . . .

[Havakasha]

Traders manipulating stocks under $1.

http://www.reuters.com/article/idUSTRE68P27W20100926

[Sirius Roadkill]

Traders manipulating stocks under $1.

http://www.reuters.com/article/idUSTRE68P27W20100926

SUPERB POST LLOYD!


as a totally facetious footnote . . . but how can this be Lloyd? Tyler Savery has repeatedly assured us that this type of manipulation simply doen't exist and is only in the minds of conspiracy nuts?

I guess Knight Capital Group is just a bunch of conspiracy nut jobs, huh?